Yes, Virginia, there is inflation

turbo6bar · 05-19-2006, 01:16 PM

I felt inflation shock today.

I've been shopping for new implements for the Kubota tractor. I recently sold my old tiller and have plans to buy a larger model. About 5 weeks ago, the price on the 72" tiller was $1450. Today, the price is $1598. The salesman blamed the price increase on higher fuel prices.

I'm also hunting for a good buy on a tractor-mounted post hole digger. The best price for the model I want is $715. I decided to do some googling to find other dealers. I spied a place in Iowa. Their price list(apparently from fall 05) showed a price of $514 for the same model. I phoned the dealer, and he said the price of everything has gone sky-high.

I know steel prices are up big since 2003, but I didn't think we'd see consumer-level prices up 10% within a few months.

Anyone else feel the pain, lately?
jurgen

WOODPIE · 05-19-2006, 05:06 PM

I'm in the woodworking business, mostly hardwoods but also some pine, cedar and fir. Everything is jumping up in price. Most notable is the price on white oak.

One of our regular customers had us quote a very large white oak job (tractor-trailor quantities here) just two months ago, and now those price quotes are worthless. Our cost has jumped 20% in that time, and some thicknesses, such as 6/4 and 8/4, are getting hard to find.

Even poplar, pretty much a commodity lumber for our trade, has jumped $200 per thousand B.F.

Ed

Tervuren · Tervuren's Garage

The company I work or is wokring on a price increase. Cost of materials is over double over what it was a few years ago.

turbo6bar · 05-20-2006, 05:22 AM

I'm surprised inflation of materials hasn't worked into core CPI numbers. The last number was 0.3% or 3.6%/yr inflation. That number understates the severity, and I feel it will only get worse. Then again, this is the first time I've been shocked by a price increase. Inflation is usually a silent force.

widebody911 · widebody911's Garage

Quote:

Originally posted by turbo6bar
I'm surprised inflation of materials hasn't worked into core CPI numbers.

The CPI is useless.

jyl · jyl's Garage

CPI has various adjustments that cause it to understate actual inflation. Substitution, hedonic, core, etc.

Whether these are done to make the CPI more valid, or to minimize the part of the budget deficit caused by cost-of-living adjustments, is unclear - probably depends on how cynical you are.

Here is a great article explaining it.

http://www.financialsense.com/stormwatch/2005/0624.html

I really wish I had an estimate of what true CPI would be without these adjustments. My gut guess is something like 7% currently.

speeder · speeder's Garage

When the cost housing and energy doubles in 3-4 years, and rents rise 30-40% in desirable areas, that is the worst inflation I have ever seen in the U.S. It is unprecedented.

It will affect every area of life, I'm just surprised that the doubling of diesel prices has not made prices of everything jump even faster. I want to stay hopeful, but I think that we are in for a long period of diminished quality of life for most people.

It's the ugly underbelly of the beast called "growth", unless you have multiple planets to inhabit and pull resources from it is the inevitable result of more people, economic development in China and India creating more consumers, stupid wars that squander resources and devalue currencies, etc...

It would be a looming problem no matter who was in charge, but we picked the worst possible time to let Junior drive.

turbo6bar · 05-20-2006, 10:10 AM

Looks like you guys are hard to fool. My mother agrees with the inflation camp. She tells me a 10 lb bag of potatos was $2.99 last year. This year, the 10 lb bag is $7. The produce manager shakes his head and blames high fuel prices. Egads!

It's possible cheap credit has conditioned us to ignore inflation. If the cost of a meal goes up, put it on a credit card. The savvy American will shuffle the monthly balance among 0% APR credit cards. Now, I'm wondering who's more savvy, consumer or the government.

Interesting bit from jyl's financialsense.com link:

Quote:

The manipulation didn't stop there. The bureau also began to adjust prices for quality. This practice became known as hedonics. Hedonics adjusts the prices of goods as a result of the increased pleasure a consumer derives from a product. A few examples will illustrate how removed the index has moved away from reality. Tim LaFleur is a commodity specialist for televisions at the BLS. In December last year he adjusted the price of a 27-inch television set for quality improvements. The 27-inch television set had a retail cost of $329.99. However, he decided the new model, which still sold for $329.99, had a better screen. After putting this improvement through the governments complex hedonic adjustment model he determined the improvement in the picture was worth at least $135! Taking in this improvement he adjusted the price of the TV by $135, concluding that the price of the TV had actually fallen by 29%! The price reflected in the CPI was not the actual retail store cost of $329.99, but $194.99. The only problem for we consumers is that if we went to Best Buy or Circuit City to buy that TV, we would still pay $329.99.